Thursday, July 19, 2012

NOK Earnings Today (7/19)

“As we look ahead, we expect the launch of Windows 8 for PCs and tablets plus the launch of Windows Phone 8 to be a catalyst for Lumia,” Nokia CEO Stephen Elop.

Talk about all your eggs in one hopeful basket. There was no sign that they intended to develop an Android product in addition to Windows (maybe they are secretly just in case.) Anyway, it's just a wait and see game now with NOK. If they continue to disappoint over the quarters, their stock will sink and sink until it is trading at a safe discount. If anything, it's probably fairly valued at the present time. 

Thursday, July 12, 2012

More on Nokia and the Smartphone market

I am tracking Nokia because 1) I find this space interesting and 2) if it drops low enough it prices ($1-$1.25 my current thoughts), I believe it will be a solid buying opportunity.

Nokia's CEO, Stephen Elop, has been on board for less than two years. He worked formerly at Microsoft and is the one who made Nokia change its phone platform to one that supports Windows' mobile Operating System (OS). Fine, but why not create Android powered phones (51% US market share) as well? I don't know.

They believe Windows 8 will be a catalyst for their phone. If that catalysts disappoints, and sales and market share continue to evaporate, perhaps Mr. Elop will be booted, or Nokia will at least consider adopting Android in addition to Windows. 

Here's the real problem: at different times, I have heard various people say,

"I love Amazon." The forthcoming competitor, rumored to use Android as well. If they don't, I think they can be successful anyway; or perhaps start with Android and then switch to their own later. 
"I love Google." (Android is Google's OS.)
"I love Apple."

I have never heard anyone say, "I love Microsoft." That sentence sounds almost absurd. Moreover, I've often encountered Microsoft/Windows bashing, "Every time you use Internet Explorer [by Microsoft], God kills a kitten!" For younger generations, which phone they carry, more than anything else today, is the strongest, most external statement of one's identity-- superficial as it may be. Since it's about identity, the issue of brand, "I love Amazon/Google/Apple" reigns supreme. Religion and politics are fine, but the firmaments forbid you bring up iPhone versus Android at a dinner conversation. Android users are relatively agnostic towards device makers, Samsung, HTC, Motorola-- it's all about the OS. As such, I don't think there'd be any resistance in wedging Nokia into that list.

Given those deliberations, I don't think it would be wise for Nokia to switch to Android. Until they do, the stock price may continue to drop as a result of the repercussions of that sin of omission. As such, I am waiting patiently for an approach of my tentative price target range.

Added: At the end of the day, I'm looking to buy NOK-- I think it has much greater prospects than RIMM-- I just think more bad news can come its way, and depress its stock price, to make it a worthwhile risk/reward buy.

Monday, July 9, 2012

Called it! AMZN to create a smart phone

Here is an article about Amazon's plans to release a smartphone. I have been saying that for months and am happy to have been lucky enough to post it a couple weeks ago on this blog. Some articles have surfaced suggesting AMZN buy NOK (trading at 1.86 now) for its patent portfolio of 30,000 patents, from which NOK gets $600MM in royalties per year.

I was worried about what the news of an Amazon smartphone would do to NOK--which may likely be the cause of NOK's 10% drop in price over the last couple of days. Fortunately, that random variable with unclear timing is now out of the way.

More on this later-- I believe NOK can trade much lower than it currently is. Based on 2011's numbers, the company's "free cash flow" was $700MM, compared with $5.5B in 2010. Free cash flow is one measure of the company's true earnings, which can be used here as an alternative to earnings, since theirs are negative. Let's say the company can surely be around for 4-5 more years, that values it approx at $2.8-4.5B. The current market value of the company is $7.13B, so it would not be unreasonable for the stock to drop to about $1 per share.

Nokia also pays a hefty dividend of about $2B per year, which it has not altered. A slash to this would be another news item that can bring the stock down to attractive levels.

Saturday, July 7, 2012